It’s now even harder to hide corrupt money through complicated company ownership

Following agreement by both Houses on the text of the Bill,
the 'Small
Business, Enterprise and Employment Act 2015' received Royal Assent on 26
March 2015. The Bill is now an Act of Parliament (law) and regulates aspects of
businesses including; appointment of directors, insolvency, company filing
requirements and aspects of employment law. The law aims to address the government's
'Transparency and Trust' proposals by preventing illegal activity such as money
laundering and tax evasion.

One significant change in the Act is a new provision to the
Companies Act 2006 which requires companies to now maintain a public register
of who has significant control over the company, i.e. a register of Persons
with Significant Control. A person with significant control is anyone who:

owns/controls over 25% of
shares of voting rights;

has the ability to appoint
or remove board directors;

has the right to influence
or control the company significantly.

The new provision will more easily allow the identification
of beneficial owners and controllers of shares within the company, and will
place increasing importance on compliance with disclosure requirements, as well
as making it harder to hide corrupt money through
a complicated and opaque chain on company ownership.

Becoming effective in January 2016,
companies will be required to obtain and record information annually and notify
Companies House should there be any changes to persons of significant control
within the company. Persons
with Significant Control (PSC) will also have responsibilities to disclose
their identities to the company. Failure to notify Companies House may result
in criminal penalties for either the individual or the company; additionally
companies have the right to impose sanctions on non-compliant PSCs without
having to go to court.

These new rules will increase the requirement
for compliance within companies to identify significant controllers,
specifically in companies with a complex chain of share owners. In response to
these changes, companies and investors will need to begin to prepare by proactively
implementing the new laws applicable to them. Companies should familiarise
themselves with the legislative changes to understand further how they affect
their firms and to provide up-to-date advice to their clients.

The Act has been welcomed by
campaigners for transparency into beneficial ownership. Global Witness – an NGO
running campaigns against natural resource-related conflict and corruption and
associated environmental and human rights abuses – noted:

"The new legislation is very welcome.
In particular, we have repeatedly applauded the UK government for showing the
leadership required to be the first in the world to propose putting the names of
the people behind companies out into the open. Doing so will be a big step
forward in preventing people hiding criminal activities such as tax evasion
behind anonymous companies." –

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